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One investigation leads to another

Member: Roger Isaacs

Rather like peeling an onion, financial investigations can often lead to further explorations of financial management. A good example of this is the Insolvency Service’s recent winding up of a magazine publisher.

In this case, the Insolvency Service wound up a publishing company that produced magazines that supported the emergency services. The court heard that to secure revenue, salespeople would cold-call local businesses, local authorities, schools and sports and social clubs, offering advertising space in two magazines.

The publisher claimed to produce three editions of each title per year that went to 25,000 recipients and the salespeople maintained that they worked for the emergency services or associated charities, while proceeds went towards the emergency services.

However, following complaints, the Insolvency Service conducted confidential investigations into the publisher’s activities before uncovering that their claims were misleading and often false. In fact, there was no evidence that the magazines were ever distributed to the purported distribution list and it appeared that the financial contributions they received never made it to the emergency services or associated charities.

This investigation and the winding up of the company has led to the Official Receiver conducting a further financial investigation into its affairs, including into the conduct of the former director.

This means that the working practices of the company may be scrutinised by a forensic accountant, who will examine all the relevant documentation pertaining to the company’s finances and the former director. All the bank statements will be put under the microscope and no doubt the former employees will be interviewed so that a clear picture of how the money was obtained and where it ended up will emerge.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “In cases where it is not clear what has happened to funds and they need to be traced, the skills and experience of a forensic accountant will be invaluable.

“A forensic accountant will investigate financial records meticulously and will be able to present their findings in court where required.”

Author: Roger Isaacs 16 September 2019

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